Following the large market falls we experienced at the start of 2020, the past 12 months in investment markets have been largely positive.
With employer contributions to superannuation going up to 10 per cent of an employee’s salary, this will increase the amount that most individuals are receiving for their retirement savings.
What’s in the mix?
When reviewing your superannuation it is important to remember the factors that determine returns.
In most cases, the greatest determinant on your net return is how the money is actually invested – which is likely shown on your statement.
Reviewing how much of your super is in shares and property compared to cash and fixed interest can give you an insight into why your superannuation performs the way it does.
To the end of May 2021, the 12-month return for the Australian share market (All Ords) is almost 30 per cent, a stark contrast to the return on cash and term deposits. As such, the more exposure to shares and property that your superannuation holds the greater likely return you can expect when you receive this year’s statement. However, this may be largely offset by the falls that your balance experienced during the height of COVID-19 lockdowns.
You can change it up
In most cases, superannuation account holders have the ability to alter the investment approach taken for their account. Superannuation funds typically have a range of different investments to accommodate the individual attitudes, life stages and risk appetites of its members. The most important thing to consider when reviewing your super is whether the chosen investment approach matches your appetite for risk.
Measure up the competition
Paying too much in fees can have a direct impact on your eventual retirement balance, so there has been a lot of pressure on the superannuation industry to reduce fees and remain competitive.
Ensuring that your fund is broadly competitive on fees is important, however remember to read the fine print and ensure you’re comparing apples with apples.
For a large number of Australians, their only financial protection in the event of an accident or illness is the insurance held through their superannuation. This is an often overlooked but key benefit of holding a superannuation policy, remembering that this protection is often lost when funds are moved.
There are three forms of policy: Life cover to support beneficiaries, permanent disability cover to provide a lump sum if you can never work again, and income protection/salary continuance to replace your income should you be unable to work. Check that the policies you have are suitable for your debt level, number of dependents, income and other life circumstances – the wrong or inadequate cover can have devastating impacts should it ever be needed.
While you’re taking the time to review your super, find out if you have multiple accounts.
Consolidating them into one can make it easier to manage and review your super in the future and may also save on fees.
Remember, rolling your superannuation into one account will typically cancel existing insurance policies on the other accounts, so it is important to understand the impact that this could have on you and your family if something were to go wrong and compare funds before selecting one to go with.
If in doubt about your superannuation, there is information available through the Government website moneysmart.gov.au, which can provide a great starting point. Alternatively, seek advice from a licenced professional adviser.
Lachlan Kennett is an Adelaide-based Private Wealth Director at BDO
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